Your Sponsor May Have Fewer Rights Than You Think

Richard Klein, Partner, Klein Greco & Associates

A sponsor or a holder of unsold shares can generally sell or sublet apartments without board consent. But you have to read the documents, because sometimes you find things in there that you don’t expect.

The sponsor’s actions. The board at a co-op on the Upper West Side was having issues with its sponsor, who did not want to sell his units and was continuing to sublet them to tenants who were very problematic in terms of noise and leaving garbage in the hallway.

The board’s response. We looked at the proprietary lease — which, like all leases, was written by the sponsor doing the conversion — and much to my surprise it said the sponsor has the right to sublet, but only subject to the approval of the managing agent, as long as the approval is not unreasonably withheld. So when those sublets came up for renewal, the managing agent was able to deny the applications because of the nuisance issues. The sponsor fought us for a bit, but he was the one who had written the documents, and he had to abide by his own rules. 

The lesson. Read your documents. You may assume sponsors have unfettered rights in their buildings to do what they want, but that’s not always the case.